Whether you’re just venturing into the ecommerce realm or looking for ways to improve your maturing digital enterprise, there are many critical elements to consider when it comes to payment processing, which can surmount to an exponential amount of costs or savings depending on the approach you take.

 

Expanding Opportunity

As digital technology continues to evolve and consumers increasingly make more of their purchases online and invest in more digital goods, it’s becoming nearly essential for businesses of any kind to establish an online ecommerce presence. With an estimated 1.92 billion people making digital purchases this year, and that number expected to rise in the future, the opportunity to capitalize on the ecommerce wave is far too prominent to ignore.

Depending on the stage of where your business is at, you may be asking yourself a variety of questions. New businesses may be simply wondering where to start, and how to expedite the number of conversions taking place. More mature digital companies may be more interested in finding ways to minimize costs associated with managing an online storefront to boost the bottom line.

In this article, the first of a three-part series, we will provide a high-level overview of what goes into the payments portion of an ecommerce platform, outlining some of the key considerations you should be mindful of, as well as the differences between an outsourced ecommerce solution and one that you develop yourself internally.

 

Key Elements of Payment Processing

Regardless of what stage you’re at with your digital business, continued growth should always be a key component to capitalizing on more online sales. Most of the elements broken down below will highlight specifically how your payment processing capabilities can impact growth areas, giving you some immediate questions that you should be ready to answer when actioning out your ecommerce growth plan.

 

Localization

When expanding into new markets, it’s essential that your new potential customers are put in a position to gain as much positive sentiment, and have the most frictionless path to conversion possible. From a high level, there are lots of things to be mindful of when it comes to global growth, or even when breaking into a new market, like properly doing market research, developing a go-to-market strategy, and forming important relationships with people in the market that can help give you increased visibility. But when it comes to online payments – surprisingly, many businesses often fail to adequately prepare to put together a well-structured plan.

Upon doing your market research, it’s imperative that you’re analyzing the best way to adapt your website and shopping cart experience to the local audience. Just because you may have a high converting cart in one part of the world, doesn’t mean that model will work somewhere else. Whenever you’re opening up your digital storefront to a new part of the world, make sure you’re able to answer the following questions:

 

  • What is their form of currency? This plays a very important role in ensuring cross-border penetration. A PayPal cross-border research report revealed that 45% of shoppers do not feel comfortable making a purchase in a foreign currency, and 73% simply want to pay in their own currency.
  • What type of payment methods do they use? Not all markets pay for things in the same way. Ensure you know what type of credit cards your market uses, and whether or not they use alternative forms of payments like Alipay or WePay.
  • What type of language do they speak? While this plays a larger role and should apply to your website as a whole – this is particularly important when it comes to your cart checkout page. At the sake of missing out on a conversion, you need to make sure language is clear and understandable
  • Am I displaying the correct price? This may seem simple, but consider the following: 56% of customers will abandon their purchase due to unexpected costs. Combining that with the fact that each new market will have its own types of taxes and shipping charges, this needs to be properly calculated and displayed up-front, or you run the risk of having your customer bounce.

 

For deeper insight into how to optimize your local ecommerce presence, consider partnering yourself with local resellers in the area. They are experts in their respective region and will help further position your ecommerce business for successful growth.

 

Payment Scalability

Scaling your ecommerce business effectively can be a demanding process. You need to be able to adapt to new things, and quickly. While there are a lot of areas to consider when it comes to scaling, the key thing to be aware of with payment processing is this: the more markets you’re offering your goods and services in, the more payment trends you need to keep tabs on. As mentioned above, different markets pay for things differently, and each market has their own set of rules and regulations. This can only be done effectively by manually keeping track of them all for so long before implementing forms of automation becomes an absolute necessity.

 

Security & Uptime

There are a vast amount of things you need to know about when it comes to security and uptime, which we will dive much deeper on in the second and third parts of this series.

From a high level however, understanding the fact that we are now dealing with rising security regulations like GDPR and the California Consumer Privacy Act – which require businesses to follow strict guidelines with how they’re processing user information – means that there is a whole new level of time and effort that needs to go in to ensuring compliance standards are being met.

Uptime is another area that becomes increasingly more important as you’re elevating your business’ digital growth. The more people accessing your shopping cart on a daily basis, the more significant the impact will be if your ecommerce platform is down, so implementing the proper hardware and databases to mitigate that threat is extremely important.

 

Unexpected Costs

In the realm of payments and billing, there’s more than meets the eye when it comes to costs and fees associated with managing your payments platform. Below are some of the following costs that may catch you off guard and impede your growth if you haven’t done your due diligence.

 
Chargebacks
We’ll dive deeper into just how costly chargebacks can be in the second part of this series, but for now – consider the fact that for every dollar of a chargeback that occurs, ecommerce businesses actually lose around $2.40. Even though you can take a variety of steps to mitigate this from happening, the reality is that you will always have to deal with chargebacks. Additionally, if your chargeback rate is over 1%, the merchant account that is enabling your payments to be processed may suspend your account entirely.

Case in point, you need to be factoring in both the costs of inevitable chargebacks – which will only increase as you grow your ecommerce business – and the costs required to ensure proper prevention methods.

 
Staff Time
This may seem like common sense, but as your business scales, so too will your staff resources, therefore increasing the cost of your internal operations. This is particularly true if you’re planning on building your own payments platform in-house, which requires various key roles like analysts, fraud investigators, and IT staff to ensure things get set up and working correctly. Even if you’re planning on using an out-of-the-box ecommerce solution, you will still need to invest resources into ensuring it is properly optimized and updated to reflect on your inventory of products.

As you scale your business, you will also be faced with more demanding costs in regards to staff time, like billing reconciliation and reporting, tax collection and remittance, fixing bugs, and handling customer inquiries.

 
Platform Fees
Ecommerce solutions have all sorts of different fee structures, which will explore in more depth in the section below. It’s important to select a solution that has a fee structure that makes practical business sense based on your growth goals. The ecommerce platform you started your digital enterprise with will likely not be the one you want to stick with due to the fees associated with managing the platform and processing actual payments.

 
Missed Opportunities
One of the most – if not the most – significant costs that businesses fail to properly prepare for are all of the missed opportunities that result from not adequately optimizing the ecommerce and payment experience. This can include providing the user with too many unnecessary steps like account creation, making the checkout process too long or complicated, not properly displaying costs clearly or enabling the proper payment methods (as mentioned above), or that the customers simply don’t trust your site with their information.

It’s imperative that time is constantly being allocated to optimizing your ecommerce website, especially as you start your operations in new markets.

 

To Outsource or Not to Outsource?

Now that you have a clearer picture on some of the things that need to be top-of-mind when expanding your digital business, it’s time to start asking yourself what the most practical solution is – outsourcing your ecommerce platform to a company that specializes in payment processing, or building your own payment processing engine in-house.

There are actually an incredible amount of things you need to know when it comes to intelligently answering this question, and parts two and three of this series will explore all of those elements in finer detail. From a higher level however, smaller businesses stand to benefit the most from a quicker, less labor-intensive solution like an outsourced ecommerce offering. This is simply due to the fact that the outsourced solution assumes most of the responsibilities – like IT implementation, compliance, fraud, uptime, security, and more – without you needing to pool the resources into managing it all yourself.

If you’re a larger business – or if you’re growing your revenue to a point where you’re hitting a high enough threshold of monthly revenue, the outsourced solution begins to make less sense due to the fees required to leverage the platform you’re using.

To give you a little more detail, here are some of the pros and cons of both an outsourced ecommerce solution, and building your own in-house:

 

Benefits of Outsourcing your Ecommerce

 
Reduced Developmental Costs
As we touched on above, the costs to get your own payment platform built and running can be an arduous task, and the cost of developing the actual platform and doing maintenance is going to take a much larger chunk out of your funds than if you choose an out-of-the-box option, which has already been developed and is ready to go.

 
No Time-Consuming Integration
A very lengthy validation process is involved in respect to integrating with merchant accounts and establishing the proper status, whereas an outsourced platform will have already gone through this process, saving you the time and effort.

 
Automated Settlement Reports
With a third-party ecommerce solution, settlement reports will already have a format and a sequence for being distributed to you in a clear and concise manner, whereas this would appear as raw data if you chose the DIY option.

 

Benefits of Building your Ecommerce Platform

 
No Signup or Processing Fees
One of the more frustrating things involved with outsourced ecommerce solutions are the fact that they will often charge you not only an implementation fee, but they’ll also take a cut of literally every transaction that occurs, which may not seem like a big deal if you’re a small business with lower-priced items, but this can add up exponentially as your business starts to grow.

 
Customization
There are a lot of different ways a third-party ecommerce platform can charge you for things, and when it comes to finding a platform that perfectly fits your business mould, this can be a difficult endeavor. Some may charge you different amounts based on the volume of your sales you’re making, and others may charge for additional capabilities, like recurring payments, which can be a real headache if you’re planning on leveraging a subscription ecommerce offering. With a DIY approach, you can build all of the features your business needs, without paying additional fees for doing so.

 
Your Platform as a Product
This may not be something on your radar, but once you’ve gone through all of the proper certifications, and you’ve built your own successful payments platform, you can theoretically turn this around and offer it as a product to other businesses and ISOs for a premium.

 

Looking Ahead

Now that you understand some of the key factors that go into the digital payment processing ecosphere, you can start to visualize where your ecommerce business slots in and what the better platform solution is based on your current growth situation.

The next article will analyze some of the steps you will need to take well before you begin the actual construction of your payments platform, like the merchant approval process, and understanding their complex terms and fee structures. We’ll also explore some of the major elements in terms of what needs to be built for a successful platform launch.

Our third and final article will cover some of the most significant things you need to be aware of when it comes to scaling your ecommerce business. This will cover adhering to compliance standards, security, and government regulations. Finally, we’ll put together an in-depth analysis of exactly what this entire process looks like from a cost perspective, helping you understand just when the best time is to be transitioning from an outsourced ecommerce solution to a custom-developed one.